• DisCos offtake N2.1tr electricity, NBET clears only N564b
• Power supply to worsen as stakeholders highlight gas supply disruption concerns
• Grid collapse triggers N277.2b losses in 12 months
• Why Nigeria must fix power supply, by AfDB director

The Nigerian electricity sector teeters on the edge of bankruptcy, posing significant risks to other critical sectors of the economy following yesterday’s collapse of the national electricity grid—the 12th recorded failure in 2024.

This dire situation is compounded by unpaid debts exceeding N1.4 trillion owed to power generation companies for the first nine months of the year.

Reports indicate that the 21 operational power generation plants connected to the grid have collectively incurred losses estimated at N277.2 billion due to these frequent grid collapses, with each plant averaging a loss of approximately N13.2 billion.

In yet another episode of this persistent challenge, the latest grid failure resulted in a nationwide blackout, with power generation plummeting from around 3,000 megawatts at 1:00 p.m. to zero megawatts by 2:00 p.m.

The Transmission Company of Nigeria (TCN), which operates the grid, is widely regarded as the weakest component of the Nigerian Electricity Supply Industry (NESI). As the sole government-managed entity in the sector, the TCN continues to face intense criticism for its inefficiency and inability to provide a reliable power supply.

A review of the System Operator platform by The Guardian showed that all power generation plants were offline, rendering the grid completely inoperative.

In a public notice, the Jos Electricity Distribution Company (DisCo) confirmed the outage and attributed the blackout to a loss of power from the national grid. The company’s Head of Corporate Communications, Dr Friday Adakole Elijah, stated that the grid failure occurred at approximately 1:33 p.m. on the day in question.

Stakeholders have persistently highlighted the issues plaguing the TCN. The Managing Director of Mainstream Energy Solutions Limited, Audu Lamu, criticised the TCN, attributing the recurring collapses to mismanagement, outdated infrastructure, and inadequate maintenance.

During a hearing organised by Nigerian authorities, Lamu warned that without better coordination between private operators and the TCN leadership, the country’s transmission infrastructure would continue to deteriorate. He also cited complacency as a significant factor in the frequent grid failures.

Financial performance in the sector remains dire. In January 2024, the invoice value for electricity services was N256.12 billion, but payment performance stood at a mere 9.46 per cent, amounting to N24.23 billion in payments. February followed with an invoice value of N208.04 billion and a payment rate of 9.29 per cent, translating to N19.33 billion. March saw a slightly improved payment performance of 9.34 per cent, with an invoice value of N235.10 billion resulting in payments of N21.96 billion.

April marked significant progress, with payment performance rising to 40.91 per cent of the N212.72 billion invoiced, equating to N87.02 billion in payments. In May, an invoice of N240.70 billion saw payments of N74.64 billion, reflecting a payment rate of 31.01 per cent. June followed with a similar performance of 31.73 per cent on an invoice of N234.63 billion, yielding N74.45 billion in payments.

In July, the sector recorded its highest invoice value for the period at N261.60 billion, with payments of N85.88 billion due to a performance rate of 32.83 per cent. August saw a slight improvement in performance to 33.87 per cent on an invoice value of N247.83 billion, amounting to N83.94 billion. In September, payment performance was 33 per cent on an invoice value of N281.3 billion, resulting in N92.8 billion in payments. Overall, total invoices for the first nine months of 2024 amounted to N2.178.2 trillion, with actual payments totalling N564 billion, highlighting the significant financial gap undermining the sector.

Amid growing concerns, stakeholders yesterday raised the alarm over disruptions in gas supply to power generation companies (GenCos) as the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) moved to enforce market discipline.

NMDPRA highlighted that substantial debts owed to gas producers had hindered their operations and urged gas off-takers, especially power generation companies, to ensure timely payments for supplied gas. Reports indicate that the Federal Government and some GenCos owe over N2 trillion in legacy debts to gas producers in Nigeria.

The NMDPRA denied claims that it directed wholesale gas suppliers to stop supplying gas to power-generating companies (GENCOs) over payment defaults, saying the report is false and baseless, emphasising that no such directive was given.

Meanwhile, electricity consumers, already burdened by tariff hikes implemented by the Nigerian Electricity Regulatory Commission (NERC) for over 20 hours of power supply, have expressed frustration over recurring grid collapses. They fear that the poor reliability of the national grid could lead to a bleak festive season as businesses and institutions struggle with an escalating energy crisis.

Bolaji Adebayo, a resident who spoke with The Guardian, lamented that the latest grid collapse occurred at an inopportune time, raising concerns about the country’s energy infrastructure. “The government needs to find a lasting solution to this persistent issue, and the solution must be urgent. We shouldn’t celebrate the New Year in darkness,” he said.

Adeola Samuel-Ilori, the national coordinator of the All Electricity Consumers Protection Forum (AECPF), described the recurring grid failures as a national and international embarrassment. He noted that consumers bear the brunt of these failures.

“The government continues to ignore obvious solutions to grid collapses. It’s no secret that obsolete equipment, poorly maintained substations, and occasional vandalism are major causes. The Transmission Company of Nigeria (TCN) has made little to no progress on improving infrastructure since privatisation. Despite the billions of naira and dollars invested, the recurring collapses remain an eyesore due to mismanagement or misuse of funds,” Samuel-Ilori said.

He criticised the handling of funding from the African Development Bank (AfDB), noting that disagreements over leadership appointments delayed the release of $400 million earmarked for improving infrastructure.

“Until the entire system is overhauled, we won’t see meaningful progress. Money may continue to be allocated, but there’s little to no monitoring of how it’s spent,” he added.

Samuel-Ilori also lauded NMDPRA’s directive, calling it overdue. He attributed part of the problem to electricity distribution companies (DisCos) that fail to pay for power taken from GenCos promptly despite frequent tariff hikes.

He urged the government to support GenCos by selling gas to them in naira, similar to the arrangement with Dangote for petroleum. “Without power generation, there’s nothing to distribute. GenCos are the most critical part of the energy sector, and the government must prioritise their stability,” he stressed.

Addressing the broader energy challenges, Samuel-Ilori criticised the lack of investor confidence, saying: “Nigeria has become a place where anything goes. Who would want to invest in a system where the grid collapses every other day?

The promise of cost-reflective tariffs is meaningless without reliable infrastructure.”

For his part, Electricity Market Analyst Lanre Elatuyi described the persistent grid collapses as a major issue that does not appear to have an imminent solution. He emphasised that Nigerians have not been provided with reports on previous grid failures, and those responsible for finding lasting solutions have yet to share publicly available information on how they plan to prevent future incidents.

“I remain hopeful and will wait until the Nigerian Independent System Operator (NISO) becomes fully operational as the administrator of system and market operations within the Competitive Wholesale Electricity Market. Hopefully, this will lead to improvements in grid reliability,” he said.

On the issue of halted gas supply, Elatuyi stated that it is not surprising, given that gas producers are businesses that need to stay profitable. He highlighted the significant debts GenCos owe to gas producers, a situation driven by poor market remittances from DisCos.

With GenCos receiving payment for barely 40 per cent of their invoices, he stressed that it is impossible for them to meet their financial obligations to gas suppliers. However, he underscored the urgent need for the Federal Government to intervene, as they have done in the past, to prevent the entire country from being plunged into darkness.

Relatedly, Mr Wale Shonibare, a financial expert and Director of Energy Financial Solutions, Policy and Regulation Department at the African Development Bank Group, has called on the Federal Government to prioritise power sector infrastructure development to boost Nigeria’s industrial growth.

Shonibare made the appeal in an interview with the News Agency of Nigeria (NAN) during the African Investment Forum, Market Days 2024, which recently concluded in Rabat, Morocco. He stressed that affordable baseload power is critical for industrialisation, economic growth, and development.

Using China and Germany as examples, Shonibare highlighted how access to cheap electricity reduces production costs and enhances product competitiveness. He said Nigeria has the potential to become a manufacturing hub for West Africa and possibly the entire continent, provided adequate power infrastructure is established.

“If we can get that power issue right, then we can add value to our production. We don’t just sell raw materials,” Shonibare stated, adding that power costs constitute about 40 per cent of expenses in aluminium smelting, a key industrial activity. He noted that solving the power challenges would allow Nigeria to produce aluminium locally and build an automotive industry capable of manufacturing vehicles.

Shonibare emphasised the importance of sustainable utilities and well-structured tariff systems to attract investment into the sector. He warned that investment would be difficult to secure without financial viability in the utilities.

“I was very involved in the privatisation effort, mobilising investment when I was working in Nigeria about eight years ago. Look at what has happened to all those loans taken then. If we don’t demonstrate that Nigeria is a viable investment destination, capital will flow elsewhere, as it is not sentimental,” he said.

The expert pointed to the need for infrastructure to evacuate stranded power and urged the government to prioritise investments in transmission and distribution to address frequent grid collapses. He noted that while Nigeria has sufficient generation capacity, robust transmission lines, effective distribution systems, substations, and better metering are required to deliver electricity to end-users.

Shonibare cautioned against focusing solely on power generation, noting that grid fragility undermines renewable energy integration. “Politicians often favour ribbon-cutting ceremonies tied to generation projects, but the entire value chain requires attention,” he said.

He also called for urgent action to stabilise the grid, adding that once a stable platform is achieved, other critical aspects of the power sector can be effectively developed.

Shonibare lauded states’ increasing involvement in the power sector, describing it as a positive innovation. He observed that states, being closer to the people, would be held accountable for providing electricity, unlike in the past when power generation was on the exclusive legislative list.

“We’ve seen talent emerging from Nigeria, and we need to mobilise our local financial sector. Nobody else will do it for us. If the sector is bankable, investment will follow,” he said, adding that the success of the telecoms sector is proof that a similar transformation is possible in the power sector.